Justia Insurance Law Opinion Summaries

A surgery center performed a liposuction procedure on April Jenkins, who died during the operation. Her father, Hal Jenkins, engaged in negotiations with the center’s insurer, Prime Insurance Company, regarding liability. The policy had a $50,000 per occurrence limit, which decreased as Prime Insurance paid defense costs. After months of negotiations, Hal Jenkins sued the surgery center, CLJ Healthcare, LLC, and Prime Insurance offered the remaining policy limit. Jenkins rejected the offer. Subsequently, Jenkins learned of a separate $2 million policy through another insurer, Owners Insurance Company, and demanded payment from both insurers. Owners Insurance denied coverage. Jenkins and CLJ Healthcare entered into an agreement where Jenkins would receive an assignment of CLJ’s potential bad faith claim against Prime Insurance and CLJ would not defend itself in Jenkins’s malpractice suit. Jenkins then obtained an uncontested $60 million judgment against CLJ.Jenkins and CLJ sued Prime Insurance in the United States District Court for the District of Utah, alleging bad faith. The district court initially found the claim time-barred, but the United States Court of Appeals for the Tenth Circuit reversed, finding the claim timely and remanded the case. On remand, the district court granted summary judgment for Prime Insurance, concluding the evidence did not show bad faith.The United States Court of Appeals for the Tenth Circuit reviewed the case de novo and affirmed the district court’s summary judgment. The court held that, under Utah law, an insurer generally has no duty to explain policy terms absent ambiguity or fraud, and Prime Insurance’s actions—including offering the policy limit and communicating with the insured—did not constitute bad faith. The Tenth Circuit concluded that Jenkins and CLJ had not provided evidence sufficient to support a claim of bad faith against Prime Insurance. View "Jenkins v. Prime Insurance" on Justia Law

Several individuals who, as minors, alleged they were victims of sex trafficking at hotels in Philadelphia, including the Roosevelt Inn, filed civil lawsuits against various hotel operators and managers (the Policyholders). The plaintiffs claimed that the Policyholders were negligent in failing to prevent sex trafficking on their premises. At the time of these alleged incidents, the Policyholders had commercial general liability insurance from multiple insurers, including Samsung Fire & Marine Insurance Company, Harleysville, Nationwide, and Ace Property & Casualty Insurance Company. The insurers initially provided a defense subject to reservations of rights.Samsung sought a declaratory judgment from the United States District Court for the Eastern District of Pennsylvania, arguing it had no duty to defend or indemnify the Policyholders, principally on public policy grounds, asserting that coverage should not extend to alleged violations of the Pennsylvania Human Trafficking Law. Policyholders counterclaimed, seeking declarations that coverage was owed. After bankruptcy proceedings involving some Policyholders, the District Court granted judgment for the insurers, focusing solely on public policy and holding that Pennsylvania’s strong policy against sex trafficking precluded both defense and indemnification obligations.The Policyholders appealed to the United States Court of Appeals for the Third Circuit, which then certified questions of Pennsylvania law to the Supreme Court of Pennsylvania. The Supreme Court of Pennsylvania was asked to determine whether an insurer’s duty to defend or indemnify is abrogated on public policy grounds when an insured is alleged to have enabled or profited from sex trafficking.The Supreme Court of Pennsylvania held that neither the duty to defend nor the duty to indemnify is abrogated by public policy under these circumstances. The Court reasoned that while Pennsylvania criminalizes sex trafficking, this does not justify judicially creating an exception to insurance coverage where the policy is silent. The Court returned the matter to the Third Circuit without addressing the second certified question. View "Samsung v. RI Settlement" on Justia Law

Omega Restaurant & Bar, LLC operated a nightclub in Virginia Beach and used images of professional models in its online advertising without their consent. The models sued Omega in Virginia state court, alleging misappropriation of their likenesses and damage to their professional reputations. After the models amended their complaint, Omega removed the lawsuit to federal court and sought defense and indemnification from its commercial insurer, Covington Specialty Insurance Company, pursuant to its policy. Covington initially agreed to defend Omega under a reservation of rights, but then filed a lawsuit in federal court seeking a declaration that it had no duty to defend or indemnify Omega for the models’ claims.The United States District Court for the Eastern District of Virginia heard Covington’s declaratory relief action. In March 2022, Omega and the models settled the underlying lawsuit, entering a consent judgment, which included dismissal of the models’ claims with prejudice and assignment of Omega’s rights under the insurance policy to the models. The district court, apparently unaware of this settlement, proceeded to grant summary judgment in favor of Covington in March 2023, holding that the insurance policy did not cover the models’ claims and Covington owed no duty to defend or indemnify Omega. Omega’s subsequent motion to alter or amend the judgment was denied, and Omega appealed.The United States Court of Appeals for the Fourth Circuit reviewed the case. On appeal, Covington argued for the first time that the declaratory relief action was moot due to the settlement and consent judgment in the underlying lawsuit. Because the mootness issue had not been addressed by the district court, the Fourth Circuit remanded the case to the district court to determine whether a live case or controversy remains under Article III. The Fourth Circuit did not reach the merits of Omega’s appeal. View "Covington Specialty Insurance Company v. Omega Restaurant & Bar, LLC" on Justia Law

After enduring physical and sexual abuse while in the care of James and Susan McLaurie as a young child, the plaintiff obtained a $150 million judgment against both individuals in Missouri state court. Seeking to collect on this judgment, the plaintiff subsequently filed a new action in state court against the McLauries and their homeowner’s insurer, Liberty Mutual, asserting equitable garnishment claims against all three and additional claims, including bad faith and breach of contract, against Liberty Mutual.Liberty Mutual removed the action to the United States District Court for the Eastern District of Missouri, invoking diversity jurisdiction. At the time of removal, James McLaurie had not yet been served but later entered an appearance. The plaintiff moved to remand, arguing a lack of complete diversity, and James McLaurie joined this motion, expressly refusing to consent to removal. The district court disagreed that diversity was lacking but found that the absence of consent from all defendants rendered removal procedurally defective under the requirement of unanimity in 28 U.S.C. § 1446(b)(2)(A). The court granted remand on this procedural ground.On appeal, the United States Court of Appeals for the Eighth Circuit examined whether it had jurisdiction to review the district court’s remand order. The appellate court held that, under 28 U.S.C. § 1447(d), remand orders based on procedural defects—such as a lack of unanimity among defendants—are not reviewable, so long as the district court’s basis was at least “colorably” procedural. The court determined that the district court’s characterization of its order as resting on a procedural defect was colorable. Accordingly, the Eighth Circuit dismissed the appeal for lack of jurisdiction. View "G.T. v. Liberty Mutual Fire Insurance Company" on Justia Law

A group of unmarried automobile insurance policyholders challenged a California Department of Insurance regulation that allows private auto insurers to use marital status as a factor in setting rates, so long as there is a substantial relationship between marital status and risk of loss. Their argument was that after legislative amendments in 2005 and 2008, the regulation conflicted with the Unruh Civil Rights Act—which was amended to prohibit businesses from discriminating based on marital status—and the Rosenthal Auto Insurance Nondiscrimination Law (RAIN law), which similarly restricted insurers from using protected characteristics for rate-setting.The Superior Court of Alameda County denied the petition for a writ of mandate, concluding that a limiting clause in the Unruh Civil Rights Act—stating it confers no right or privilege “conditioned or limited by law”—meant the preexisting marital status regulation, which specifically addressed insurance rating factors, was not overridden by the later amendments to the Act. The court found that the regulation could be harmonized with the Act and that Proposition 103, which authorized the regulation, anticipated that the Unruh Act might be amended but included the limiting language to avoid conflict.The Court of Appeal of the State of California, First Appellate District, Division Three, affirmed the lower court’s decision. It held that the regulation does not conflict with the Unruh Civil Rights Act or the RAIN law. The court found that the Act’s limiting provision requires deference to the specific insurance regulation on marital status, which has the force of law and was validly adopted under Proposition 103. It also determined that legislative history of the RAIN law showed no intent to strip the Insurance Commissioner of authority over rating factors. The judgment denying the writ of mandate was affirmed. View "Ison v. Lara" on Justia Law

Golden Corral, a buffet restaurant chain, held a commercial property insurance policy issued by Illinois Union Insurance Company, covering losses from physical damage to its property. When state and local governments, including North Carolina, mandated closure of indoor dining facilities in response to the COVID-19 pandemic, Golden Corral suspended its restaurant operations, resulting in significant lost revenue and reduced income from franchisees. Golden Corral submitted a claim to Illinois Union for coverage of these losses, which Illinois Union denied.After the denial, Golden Corral filed suit in North Carolina state court, seeking a declaration that its pandemic-related losses were covered under the policy. The case was removed to the United States District Court for the Eastern District of North Carolina, where Golden Corral amended its complaint to add claims for breach of contract and breach of the implied covenant of good faith and fair dealing. Illinois Union moved for judgment on the pleadings, arguing that COVID-19 did not cause physical loss or damage as required for coverage. The district court granted the motion and dismissed the case with prejudice, a decision affirmed by the United States Court of Appeals for the Fourth Circuit.Over three years later, Golden Corral sought relief from final judgment under Federal Rule of Civil Procedure 60(b)(6), citing a subsequent North Carolina Supreme Court decision in North State Deli v. Cincinnati Insurance Co. that found similar losses covered. The United States Court of Appeals for the Fourth Circuit reviewed the district court’s denial of the Rule 60(b)(6) motion for abuse of discretion. The court held that a change in state decisional law alone does not constitute "extraordinary circumstances" warranting relief under Rule 60(b)(6), especially when the later case involved different parties, policies, and injuries. The Fourth Circuit affirmed the district court’s decision to deny relief. View "Golden Corral Corp. v. Illinois Union Insurance Co." on Justia Law

A neurosurgeon who co-owned a medical practice and several unrelated businesses purchased disability insurance policies through insurance brokers employed by a financial group. The brokers allegedly advised him he would receive maximum benefits if disabled, without disclosing that his other business interests could reduce his benefits. After being diagnosed with a vision condition that prevented him from performing neurosurgery, the plaintiff claimed maximum benefits but received only partial payments because of his unrelated business interests. He filed a complaint asserting, among other claims, that the brokers violated the New Jersey Consumer Fraud Act (CFA) by failing to obtain sufficient disability insurance.The Superior Court, Law Division, granted the brokers’ motion to dismiss the CFA count, relying on Plemmons v. Blue Chip Insurance Services, Inc., which held insurance brokers are exempt from the CFA as “semi-professionals.” The trial court noted but did not resolve the tension between Plemmons and Shaw v. Shand, which narrowly construed the CFA's “learned professional” exception. The Appellate Division affirmed the dismissal. The Supreme Court of New Jersey granted leave to appeal the CFA count.The Supreme Court of New Jersey held that insurance brokers, producers, and agents are not exempt from liability under the CFA, neither as “semi-professionals” nor under the “learned professional” exception. The Court found no support for a “semi-professional” exemption in the CFA’s text and determined that licensing or regulation alone does not justify exemption. The Court reversed the Appellate Division’s judgment, vacated the CFA count’s dismissal, and remanded for further proceedings, also inviting legislative clarification on professional exemptions under the CFA. View "Lowe v. Audet" on Justia Law

A lightning strike in October 2019 caused a destructive fire at a large mansion in southern Illinois owned by Wesley Gibson. Gibson had acquired the property nearly 30 years earlier as a family vacation home and, over time, extensively renovated it and filled it with valuable furniture, antiques, and artwork. Eventually, he transformed the mansion and surrounding properties into a commercial lodging and events venue, hosting weddings, corporate retreats, and other gatherings. Gibson’s family continued to use the mansion for about 70 nights per year, but the property’s primary use became commercial, as evidenced by tax filings and significant rental income.Following the fire, Gibson filed a claim with Chubb National Insurance Company under his homeowner’s policy, which provided $8.75 million for the dwelling and $3.5 million for its contents. Chubb paid the dwelling coverage in full but limited payment for the contents to $25,000, citing a business property exclusion in the policy that capped coverage for property used in business at that amount. Gibson sued Chubb in the United States District Court for the Northern District of Illinois for breach of contract and violations of Illinois insurance and consumer-fraud statutes. On cross-motions for summary judgment, the district judge found that the majority of the contents were used for business purposes and subject to the $25,000 limit, granting partial summary judgment to Chubb. The judge allowed Gibson’s claim to proceed only for certain items kept in areas not accessible to guests. After settling remaining issues, final judgment was entered.The United States Court of Appeals for the Seventh Circuit affirmed. The court held that under the terms of the policy and Illinois law, Chubb properly classified most of the mansion’s contents as business property and was only obligated to pay the $25,000 sublimit. The court also affirmed summary judgment for Chubb on the statutory claims. View "Gibson v Chubb National Insurance Company" on Justia Law

A married couple insured their vehicles under a Maryland automobile insurance policy with liability limits of $300,000 per person and $300,000 per occurrence. During an accident, the wife negligently drove one of the insured vehicles, resulting in the death of her husband, who was a passenger. Their four adult children, who did not reside in the household, filed wrongful death claims against their mother under Maryland’s wrongful death statute, seeking damages from the insurer.After the children made their claims, the insurance company invoked the policy’s household exclusion provision. That exclusion limited coverage for “bodily injury to any insured, or to any relative of an insured residing in his household” to the statutory minimum of $30,000. The insurer argued that the children’s claims, though brought under the wrongful death statute, were based on the “bodily injury” (death) of an insured and thus subject to the exclusion’s limit.The Circuit Court for Montgomery County granted declaratory judgment in favor of the insurance company, holding that the children’s claims were derivative of their father’s bodily injury, and that coverage was properly limited by the household exclusion. The Appellate Court of Maryland affirmed, relying on the plain language of the policy and prior Maryland case law, including Costello v. Nationwide Mutual Insurance Co., Daley v. United Services Automobile Ass’n, and Valliere v. Allstate Insurance Co., concluding that the household exclusion applied to the adult children’s claims.The Supreme Court of Maryland affirmed the judgment of the Appellate Court. It held that, under the unambiguous language of the policy, the household exclusion applies to limit the insurer’s liability for damages claimed by non-resident adult children under the wrongful death statute when the claim is based on the death of an insured. The Court concluded that the policy’s use of “bodily injury” as the triggering event controls, and the household exclusion limits recovery to $30,000. View "Murphy v. Gov't Employees Insurance Co." on Justia Law

A roofing contractor was sued in Illinois state court by the estates of two individuals who died when a building façade collapsed. The estates alleged that the contractor had negligently performed repairs on the building after it was damaged by a windstorm in August 2020. The repairs were completed by December 2020, and the fatal collapse occurred in April 2022. The contractor sought defense and indemnification from its commercial general liability insurer under a policy that began on February 8, 2022. The insurance policy included a “Prior Work Exclusion” that barred coverage for claims arising from work completed before the policy’s inception date.The insurer filed suit in the United States District Court for the Northern District of Illinois seeking a declaratory judgment that it had no duty to defend or indemnify the contractor in the underlying state lawsuit. The contractor counterclaimed for breach of contract and argued that the exclusion rendered coverage illusory. Both parties moved for judgment on the pleadings. The district court granted judgment to the insurer, holding that the exclusion applied because the work at issue was completed before the policy period and that the exclusion did not render the coverage illusory, as some coverage for completed operations remained.On appeal, the United States Court of Appeals for the Seventh Circuit affirmed the district court’s judgment. The court held that, under Illinois law, the Prior Work Exclusion clearly barred coverage for claims arising from work completed prior to February 8, 2022. The court further held that the exclusion did not make completed-operations coverage illusory because the policy still provided coverage for work completed during the policy period. The judgment in favor of the insurer was affirmed. View "Nautilus Insurance Company v Bee Quality Inc." on Justia Law